Alan Milburn, the social mobility tsar and former Labour minister, said internships should not be part of the 'informal economy'. Photograph: Martin Rickett/PA

Internships should be regulated and subject to the same rules as other parts of the labour market, a report by the government's social mobility tsar recommends.

The independent reviewer on social mobility, the former Labour minister Alan Milburn, said some internships lasting up to a year had become a substitute for paid work and many interns had in effect become "quasi-workers".

In his report, Fair Access to Professional Careers, Milburn also said that those from affluent backgrounds dominated many professions, especially medicine, the judiciary and the media, and the country had undergone "social engineering on a grand scale" favourable to those from the upper classes.

The 90-page report found that:

• 54% of top journalists were privately educated and the media had "become almost entirely a degree-only profession" and "one of the most socially exclusive of professions".

• 83 out of 114 high court judges had attended private schools, leading to a judiciary that was "solidly socially elitist".

• 35% of MPs in the current intake were privately educated, compared with 30% in 1997.

Speaking at the report's launch on Wednesday, Milburn said the next generation of young professionals was becoming a "mirror image" of previous generations, and he wanted to change the country's "default setting" of selecting professionals from already privileged backgrounds.

Milburn said internships and work experience were key to changing opportunity among poorer children, but access to them remained "a lottery even as they become a key part of the professional labour market."

Milburn recommended that in many cases internships should be paid and regulated under employment law.

"Internships should no longer be treated as part of the informal economy," the report said. "They should be subject to similar rules to other parts of the labour market. That means introducing proper, transparent, and fair process for selection and reasonable terms of employment, including remuneration for internships."

Milburn – who also revealed that many Labour MPs were unhappy with his role advising the coalition – said one-third of vacancies in professional organisations were being filled by those who had previously interned within the business, but "most interns were unpaid and recruited informally", which was disadvantaging those from less affluent backgrounds who "simply cannot afford to work for free for any length of time".

Milburn pointed a finger of blame at parliament and the media, saying most interns there were still recruited informally, "favouring … those with connections".

"This idea that somehow or other we continue with this treadmill where interns work for free" and are recruited on the basis of whom they know, he said, "had to end".

He also stood by a previous recommendation that student loans be split into four rather than three payments, so students could use loans to subsidise internships over the summer holidays, and added that the government should be funding some internships in order to help those from less affluent backgrounds get on the ladder of well-paid employment.

Responding to the report, the deputy prime minister, Nick Clegg, said: "I appointed Alan Milburn precisely so that he would hold our feet to the fire on making society fairer for everyone.

"Progress has not been fast enough and in some industries the issues are still not taken seriously. There needs to be a step change in professions like medicine, journalism and politics.

"We'll be picking up the pace and keeping the pressure on in the coming months to get more companies flying the flag for fairness, as well as looking at what more the government can and should do."

Ben Lyons, co-director of Intern Aware, welcomed the report, saying: "We're pleased that Alan Milburn has recognised that fair internships are an essential part of making access to the professions fairer.

"The experience of interning is approaching a necessity for graduates but as so many of these opportunities last for months without pay, young people without support from the Bank of Mum and Dad are frozen out.

"Now is the time for action. HM Revenue and Customs must enforce the minimum wage that most interns are entitled to [and] smart employers should appreciate that by refusing to pay interns, they reduce their pool of talent to the minority of people who can afford to work for free."